SNAP #10: Cola Wars in India

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Today, the Indian soft drink market is dominated by Coca Cola followed by Pepsi. But the evolution of this industry in India has been very interesting. From the 1950s, local and foreign players have competed for market share. There have been lawsuits, acquisitions, companies leaving India and even the introduction of cola created by the Indian government. In this SNAP, we would revisit the history and evolution of the Cola industry in India.

Parle vs Coca Cola

In the year 1950, Parle became the first company to launch a cola drink in India at a national level. Parle was famous for its Glucose biscuits: Parle G and hence named the drink as Gluco Cola. Its print ad (below) was designed by the famous cartoonist: RK Laxman. On the other hand, Coca Cola had already registered its trademark in India but was yet to start selling. It objected to the ‘Gluco Cola’ name and asked Parle to change the name. Parle changed the name to ‘Parle Cola’ but Coca Cola was adamant to get the ‘Cola’ word dropped. To avoid the legal battle with Coke, Parle dropped the product.

By 1952, Coke had started production in India. But Parle didn’t want to give up on its soft drink ambitions. Avoiding a direct rivalry with Coke, Parle launched an orange-flavoured drink, Gold Spot. The brand was focused on kids as the target audience. It was received well and gained a lot of popularity in few years.

In the 60s, Parle expanded its distribution network across the country. And in 1970, it launched one more drink with lemon flavour and named it Limca. It had a unique taste that became popular especially among the female crowd.

In the 70s, Coca Cola was the clear market leader with no other major cola competitor. Meanwhile, Parle was happy with its No 2 spot. But, things were about to change very fast.

Coca Cola leaves India

In the year 1977, Congress lost the national elections and was replaced by the Janata Party at the centre. Right from the day it came into power, Janata Party was hell-bent on nationalization. As part of the Foreign Exchange Regulation Act (FERA), the new government asked Coke to reduce its foreign holding to 40%. They were also asked to share Coke’s secret concentrate formula. Coke decided to leave India over this unacceptable demand of revealing its secret formula. Now, there was a big void left with no large cola player in the country.

And hence, the government decided to intervene. They tasked Modern Foods Industries, a PSU company to develop a replacement for Coke. Modern Foods created a product with lesser caffeine and named it Double 7 (77) after the year in which Janata Party came into power. After Double 7 was launched, it failed to get much success in the market. The primary reason was that its taste was not as good as Coca Cola.

So, the void still existed while two players were planning to take advantage of the situation.

New Desi Players

Pure Drinks was a bottler for Coke in North India. When Coke left in 1977, it decided to create its own brand. In 1978, they launched Campa Cola, which had a very similar taste and branding to Coca Cola. The logo also seemed like a rip off from Coke. But since it felt more like Coke, the customers liked it much better than Double 7.

But Parle was in the best position to capitalize on this situation with existing products and a strong distribution network. After a lot of thought and research, Parle created a drink that used Indian spices like cardamom, cinnamon, lemon oil, etc. This gave it a different and stronger taste than the other drinks in the market. Parle decided to name the product Thumbs Up. But it removed the B later to ensure that the name is not generic. In 1978, Thums Up was launched with heavy advertising and the tagline ‘Happy days are here again’. The ads positioned to have Thums Up with Indian food items which would later become a habit for Indian consumers.

In just 2 years, Thums Up became the preferred choice to fill the gap left by Coca Cola. The unique taste and aggressive advertising helped it overcome competition from other players like Campa Cola. They kept spending to increase brand awareness by roping in cricketers like Sunil Gavaskar, Ravi Shastri and Sandeep Patil for TV ads.

In 1982, Campa Cola decided to cut the price on its 200 ml bottle to capture market share from Thums Up. Thums Up reverted with something completely unexpected. Instead of reducing prices, it increased the bottle size to 250 ml at the same price. And labelled the larger bottle as Maha Cola. Maha Cola made Thums Up even more popular. In 1983, its market share was around 60% with Campa Cola the distant second.

Coke Returns with Pepsi

In the late 1980s, India’s financial condition was no so great. There were discussions to open foreign investments into the country. This meant that Coke and Pepsi can enter India. In 1990, Pepsi arrived in India with its three major beverage brands: Pepsi, Mirinda and Seven Up. It heavily promoted Pepsi among the Indian consumers by distributing free coupons and advertising on billboards.

In 1991, Pepsi conducted a survey in Bangalore to gauge people’s preferences in soft drinks. The results were shocking. Only 10% of the people surveyed preferred Pepsi over Thums Up. Pepsi decided to use its financial muscle and ran extensive ad campaigns on TV with Juhi Chawla, Aishwarya Rai, Sachin and Shahrukh Khan in coming years. In response to Pepsi’s ads, Thums Up changed its tagline to ‘Taste the Thunder’ and ran many campaigns around it. It is probably the longest-running tagline for a brand with ads made with stars like Salman Khan, Akshay Kumar and Ranveer Singh over the years.

In a lot of its ads (like below) Thums up downplayed Pepsi by calling it a drink for kids. And positioned Thums Up as a drink for grown-ups. These campaigns helped Thums Up control the loss of market share to Pepsi. Pepsi remained No 2 in market share behind Thums Up.

In 1993, Coke finally made a comeback and was hell-bent on getting back its No.1 position. It decided to buy out Thums Up and other soft drink brands of Parle. Legends have it that Coke even told Parle executives that if they don’t sell Thums Up, they would supply free Coke to the entire country for a year. Under a lot of pressure, Parle sold Thums Up, Gold Spot, Citra and Limca to Coca Cola for 60 million $ in 1993. Coke discontinued Gold Spot and Citra later.

After the acquisition, Coca Cola reduced its focus on Thums Up. It wanted Coke to become the number one brand in India and pumped money into pushing it across India. But the demand for Thums Up remained strong and it continued to rule the market ahead of both Pepsi and Coca Cola till 2012. Only in 2013, it was overtaken by Sprite in terms of market share. But, even today it clocks around 6500 crores INR a year in sales and is on its way to becoming a billion-dollar brand for Coca Cola.

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References

1. How Thums Up stole Coca Cola’s thunder - Livemint

2. The brand that refused to die - Business Today

3. Images source - Google images and oldindianads.com